Correlation Between Forte Biosciences and SAB Biotherapeutics

Can any of the company-specific risk be diversified away by investing in both Forte Biosciences and SAB Biotherapeutics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Forte Biosciences and SAB Biotherapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Forte Biosciences and SAB Biotherapeutics, you can compare the effects of market volatilities on Forte Biosciences and SAB Biotherapeutics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Forte Biosciences with a short position of SAB Biotherapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forte Biosciences and SAB Biotherapeutics.

Diversification Opportunities for Forte Biosciences and SAB Biotherapeutics

0.25

Correlation Coefficient

Forte Biosciences  SAB Biotherapeutics

Modest diversification

The 3 months correlation between Forte and SAB is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Forte Biosciences and SAB Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAB Biotherapeutics and Forte Biosciences is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Forte Biosciences are associated (or correlated) with SAB Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAB Biotherapeutics has no effect on the direction of Forte Biosciences i.e., Forte Biosciences and SAB Biotherapeutics go up and down completely randomly.

Pair Corralation between Forte Biosciences and SAB Biotherapeutics

Given the investment horizon of 90 days Forte Biosciences is expected to generate 1.7 times more return on investment than SAB Biotherapeutics. However, Forte Biosciences is 1.7 times more volatile than SAB Biotherapeutics. It trades about 0.16 of its potential returns per unit of risk. SAB Biotherapeutics is currently generating about 0.1 per unit of risk. If you would invest  728.00  in Forte Biosciences on September 13, 2024 and sell it today you would earn a total of  1,640  from holding Forte Biosciences or generate 225.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Forte Biosciences  vs.  SAB Biotherapeutics

Forte Biosciences

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forte Biosciences are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Forte Biosciences showed solid returns over the last few months and may actually be approaching a breakup point.

SAB Biotherapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAB Biotherapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, SAB Biotherapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Forte Biosciences and SAB Biotherapeutics

The main advantage of trading using opposite Forte Biosciences and SAB Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forte Biosciences position performs unexpectedly, SAB Biotherapeutics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SAB Biotherapeutics will offset losses from the drop in SAB Biotherapeutics' long position.

The idea behind Forte Biosciences and SAB Biotherapeutics pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.